Bank of China (Malaysia) Berhad v Casa Andaman Sdn. Bhd. (WA-28NCC-1039-11/2024)

There are two enclosures for determination before this Court.

Enclosure 2 is a winding-up petition filed by the Petitioner, Bank of China (Malaysia) Berhad, against the Respondent, Casa Andaman Sdn Bhd, under sections 465(1)(e) and (h) and 466(1)(a) of the Companies Act 2016 (CA 2016).

Enclosure 25 is the Respondent's application to stay the winding-up proceedings pending the disposal of Kuala Lumpur High Court Civil Suit No. WA-22NCVC-20-01/2025 (Suit 20).

At the conclusion of the hearing, I allowed the winding-up petition in Enclosure 2 and dismissed the Respondent's application to stay the winding-up proceedings in Enclosure 25.

My reasons are stated below.

Xperential Zone Sdn Bhd (XZSB) was the borrower under a banking facility of RM18.6 million granted by the Petitioner under a Facilities Agreement dated 24 April 2015. The Respondent, Casa Andaman Sdn Bhd, was the corporate guarantor for that facility.

The facility was used to finance the purchase of nine (9) commercial office parcels in Menara UP (the Parcels) under a Sale and Purchase Agreement dated 17 June 2014. XZSB subsequently assigned all its rights, title, and interest in the Parcels to the Petitioner as security under a Deed of Assignment dated 24 April 2015.

XZSB defaulted on its repayment obligations, leading to legal proceedings in the Kuala Lumpur High Court under Suit No. WA-22NCC-370-05/2023 (Suit 370).

On 8 January 2024, a summary judgment was entered against XZSB, the Respondent, and the personal guarantors for RM15,994,461.55, together with interest and costs (the Judgment Sum). The judgment was not appealed, and no stay of execution was sought or obtained.

A statutory notice of demand under section 466 of the CA 2016, dated 28 June 2024, was served on the Respondent on 3 July 2024 and acknowledged by the Respondent the same day. Despite the expiry of the prescribed 21-day period, the Respondent failed to pay the Judgment Sum.

The winding-up petition was filed on 5 November 2024. The Respondent did not dispute the judgment debt. Its sole ground for resisting the petition was that an interested purchaser had been found for the Parcels, but the sale was being held up by a separate civil suit, Suit 20, concerning a strata title dispute between XZSB and the developer/proprietor of Menara UP.

The background to Suit 20 is as follows. Without XZSB's knowledge or consent, the developer/proprietor amalgamated the nine parcels into one, altered their delineation, added 22 accessory parcels, and converted the land use category from "Office" to "Hotel". Despite XZSB's best efforts, the developer/proprietor refused to release the strata titles for rectification. Suit 20 was commenced by XZSB to rectify and reinstate the proper strata titles.

The Respondent also filed a Notice of Motion dated 26 August 2025, in Enclosure 25, seeking a stay of the winding-up proceedings pending the disposal of Suit 20. Both matters were heard together.

The issues before this Court are:

Whether the Respondent is unable to pay its debts within the meaning of section 466 of the CA 2016.

Whether it is just and equitable to wind up the Respondent.

Whether there are special circumstances that justify a stay of the winding-up proceedings pending the disposal of Suit 20. FINDINGS OF THE COURT

Section 466(1)(a) of the CA 2016 provides that a company shall be deemed unable to pay its debts if a creditor has served a statutory demand and the company has, for 21 days, failed to pay, secure, or compound for the sum demanded. Section 465(1)(e) provides that the Court may order winding up if the company is unable to pay its debts. Section 465(1)(h) empowers the Court to order winding up if it is just and equitable.

The governing legal principles are well settled. Once a company fails to comply with a statutory demand, a presumption of insolvency arises. The onus then shifts to the company to show that it is able to pay all its debts at the material time. The Court of Appeal confirmed this in SSM Management Sdn Bhd v Aeon Big (M) Sdn Bhd [2019] 4 MLJ 826 and said that: “[20] In this regard, it is settled law that once a company has failed to comply with the statutory demand, there is a presumption of insolvency against it. The onus then shifts to the company to show that it is able to pay all its debts at the material time. The test of insolvency, as the learned judge correctly noted, is the test of commercial insolvency or cash flow insolvency in that the company must be able to pay its debts when they fall due and not at some future date. In other words, the company must be willing and able to meet the current demand of the creditor. In this way, a company cannot be said to be solvent when it asserts that it is able to pay the debt but persists in not doing so.” [emphasis added]

The test is therefore one of cash flow or commercial insolvency, not balance sheet solvency. This distinction was explained by Mohd Nazlan Mohd Ghazali, JC (as His Lordship then was), in WWTAI Finance Ltd v IES Energy Holdings Sdn Bhd [2016] MLRHU 1564: “[67] In respect of the first, it is, in any event, now settled law that the issue on the inability to pay debt is to be considered in commercial context, which is the neglect to pay current demands regardless of whether the debtor is in possession of assets which, if realized would permit it to discharge its liabilities. The test of commercial insolvency simply means that the respondent company is not able to meet current debts when they fall due (see System Communication Engineering Sdn Bhd v. Zabidin Sdn Bhd [1999] 5 MLRH 826; [1999] 1 AMR 1187). It is cashflow solvency that matters. Not balance sheet solvency. [68] This is why it has been said that a company could be both insolvent but wealthy at the same time … [69] It is wholly insufficient that the assets might be realizable at some future date after the debts have become due and payable… [70] It is wholly of no significance that the Respondent owns the shares subject to the charges and that the same could be realized without much difficulty as averred. The Respondent still at present does not have the ability to repay the Facility due and owing to the Petitioner and manifestly falls within the definition of "unable to pay its debt" pursuant to s 218(1)(e) and 218(2) of the CA. For the same reason, it is insufficient for a debtor company to assert that it has other assets locked up elsewhere which can sufficiently meet its liabilities. The test of commercial solvency requires immediately availability of assets to pay current liabilities when they fall due.” [emphasis added]

In Klass Corp (M) Sdn Bhd v MKRS Management Sdn Bhd [2018] 9 MLJ 305, Mohd Nazlan J (as His Lordship then was) held as follows: - “[12] The plaintiff further argues that it is clear that the defendant is seeking to enforce the judgment of the sessions court through winding up proceedings, and this pursuit by the defendant is an abuse of process as it is designed to force the plaintiff to pay the judgment debt. [26] In the first place, it is settled law that a judgment debt is not considered as capable of having the status of being disputed. Whatever dispute that existed has been resolved by the judgment of the court. This much is clear from the decision of the Court of Appeal in the case of Pacific & Orient Insurance Co Bhd v Muniammah Muniandy [2010] MLJU 2217; [2011] 1 CLJ 947 referred to earlier, which is worthy of repetition, as follows: [27] This principle is not applicable to the present case. The respondent herein had obtained a valid and enforceable judgment against the insured as well as the insurer (the appellant). The intended petition if filed is not bound to fail. He has a good chance to succeed. Therefore whether or not it causes irreparable damage is of no consequence. Thus the injunction applied for by the appellant in the present case, cannot be granted by court under this principle. [28] In the instant case before me however, the status of the judgment debt is one that is presently valid, binding and enforceable. There is no stay against the judgment of the sessions court. The plaintiff did not even apply for a stay. [34] The overriding question of whether the debt is disputed, arising from the test of whether the petition would be bound to fail, in this case is readily answered in an unequivocal ‘No’, on both counts. There is the judgment debt which means there is no bona fide dispute, and there is no stay, which in effect reinforces the absence of a bona fide dispute. [37] Further, in WWTAI Finance Ltd v IES Energy Holdings Sdn Bhd [2016] MLJU 1591 I reiterated the right of the creditor to present a winding up petition, thus: [62] It is worthy of emphasis that prima facie a creditor who is not paid has a right to file a petition for a winding up order (see the Supreme Court decision in Morgan Guaranty Trust Co of New York v Lian Seng Properties Sdn Bhd [1991] 1 MLJ 95). This is a statutory right. Upon the expiration of the 21-day period as set out in the s 218 Notice and the judgment debt remains unpaid, the debt becomes ‘due and payable’ and the respondent is deemed to be unable to pay its debts. Consequently, the petitioner succeeds in acquiring the status of a ‘creditor’ for the purposes of winding-up proceedings pursuant to s 218(1)(e) and (i) of the CA.” [emphasis added]

In Pacific & Orient Insurance Co Bhd v Muniammah Muniandy [2011] 1 CLJ 947, the Court held as follows: - “[35] In short, failure on part of a debtor to pay the particular debt claimed in the 218 notice within the stipulated three weeks period, will give rise to a statutory presumption that the company is insolvent or unable to pay all its existing debts owed to all creditors… [37] The presumption is rebuttable and the onus is shifted to debtor company to show that it is able to pay all its debts at the material time. Such rebuttal may be done at the hearing of the petition, after being filed by the creditor. To pay the particular amount or debt claimed under the 218 notice after the expiry of the stipulated three weeks period (as being done by the appellant in the present case) is obviously insufficient to rebut the said presumption. Under such circumstances, the presumption remains and the winding-up court is empowered to wind-up the company. (see: Hotel Royal Ltd Bhd v. Tina Travel & Agencies Sdn Bhd [1989] 1 LNS 170; Europlus Corp Sdn Bhd v. Lim Wai Leong [2003] 1 LNS 31; [2003] 42 MLJ 1; Re Lympne Investments Ltd [1972] 1 All ER 385; Cornhill Insurance Ple v. Improvement Services Ltd & Ors [1986] WLR 114; and Mann v. Goldstein [1968] 1 WLR 1091). [38] When the debt is clearly established it follows that the court would not in general at any rate, interfere even though the company would appear to be solvent. (see: Mann v. Goldstein (supra). Vaisey J once said in the case of In re a Company [1950] 94 SJ 369: Rich men and rich companies who did not pay their debts had only themselves to blame if it were thought that they could not pay them.” [emphasis added]

Applying these principles to the present facts, the conclusion is clear. The Petitioner obtained a valid and enforceable summary judgment on 8 January 2024. The judgment was not appealed, and no stay of execution was sought. A statutory demand was served and acknowledged on 3 July 2024. Despite the lapse of the 21-day period, the Respondent paid nothing towards the Judgment Sum. The statutory presumption of insolvency has therefore arisen and remains unrebutted.

It is noted that the Respondent did not dispute the Judgment Sum. Its own affidavit evidence and submissions effectively confirmed its indebtedness. The Respondent simply cannot pay, not because the debt is disputed, but because it lacks the present means to do so. That is precisely what commercial insolvency entails.

The Respondent also contended that the Petitioner should have enforced its security interest first.

The Respondent argued that the Petitioner holds security over the Parcels, which have a market value of RM31,808,000.00 and a forced-sale value of RM25,446,400.00, as determined by the Petitioner's own valuers, both of which exceed the Judgment Sum. The Respondent contended that, therefore, the Petitioner should have disposed of the Parcels before resorting to winding up.

This argument does not hold water. It is settled law that a judgment creditor is under no legal obligation to realise its security before exercising its statutory right to present a winding-up petition. As noted earlier, the test of insolvency is cash-flow solvency, not balance-sheet solvency. As held in WWTAI Finance Ltd v IES Energy Holdings Sdn Bhd (supra), it is wholly insufficient for a debtor company to assert that assets locked up elsewhere can meet its liabilities. What matters is the immediate availability of assets to pay current liabilities when they fall due, and that test is plainly not met here.

Furthermore, the Parcels belonged to XZSB, not to the Respondent. These are separate legal entities with distinct obligations. The Respondent cannot escape its liability as corporate guarantor by pointing to the Borrower's assets or the Petitioner's security arrangements. The Petitioner's right to enforce security assigned by the Borrower does not extinguish its statutory right to wind up the Respondent as a judgment debtor.

The Respondent's reliance on Wing Woh Trading Sdn Bhd v Irama Jaya Development Sdn Bhd [2019] MLRHU 47 is misplaced. That case is clearly distinguishable: there was no judgment against the respondent, the debt was genuinely disputed on substantial grounds, and, importantly, the petitioner itself had lodged caveats over the very properties from which payment was supposed to come, thereby preventing the respondent from realising funds to settle. None of those circumstances is present here.

The Respondent further argued that a genuine proposal to settle the Judgment Sum existed, contingent on the resolution of Suit 20, to sell the Parcels to an interested purchaser for not less than RM20,000,000.00.

I find no merit in this ground. No concrete proposal was ever put before the Petitioner. No formal offer was made, no terms were discussed, no payment timeline was suggested, and no part payment, however modest, was made at any time. The alleged proposal existed only in affidavit assertions. The Petitioner correctly pointed out that if the Respondent were genuinely serious about settling the debt, the most basic and expected step would have been to approach the Petitioner with a concrete and workable settlement proposal. That was never done.

Moreover, the identity of the interested purchaser was not disclosed, and the purchaser's ability to complete the transaction was unverified. The entire transaction was contingent on the outcome of Suit 20, litigation in which the Petitioner is not even a party. Such a speculative and entirely unsubstantiated chain of future events cannot constitute a genuine and realistic plan to satisfy a presently due judgment debt. As held in Tan Tien Seng & Anor v Grobina Resorts Sdn Bhd [2006] 4 CLJ 583, a bare claim of ability to pay, coupled with the absence of actual payment, provides no defence to a winding-up petition.

The Respondent cited Ho Shen Lee (M) Sdn Bhd & Ors v Lim Shen Lee [2023] 1 MLRA 535 to support the proposition that winding up is a remedy of last resort. While that general proposition is well established, the case is factually distinguishable. Ho Shen Lee is concerned with winding up under sections 465(1)(f) and 465(1)(h), dealing with director misconduct and the just and equitable ground, not section 465(1)(e), which concerns inability to pay debts. The legal basis and factual matrix were entirely different.

The "last resort" proposition carries most weight where the company has credibly demonstrated solvency or offered a concrete, verifiable alternative to satisfy the debt. Here, the Respondent has done neither. It has paid nothing, and its entire case rests on uncertain future events.

The Respondent also relied on Wiraflor (M) Sdn Bhd v Bio Science Capital Sdn Bhd [2011] 2 MLJ 94 to support the proposition that using winding up as a means of pressurising a financially sound company is an abuse of process. That caution applies to situations where the debt is disputed, and the company is of sound financial standing. Here, the debt is undisputed and supported by a valid summary judgment. The Respondent has also failed entirely to demonstrate sound financial standing. Therefore, I am of the view that Wiraflor (M) Sdn Bhd v Bio Science Capital Sdn Bhd (supra) has no application to the present facts.

In conclusion, the Respondent has failed to comply with the statutory demand, has not rebutted the presumption of insolvency, and has not demonstrated any credible ability to pay the Judgment Sum. The Petitioner's right to present this winding-up petition was properly exercised. I accordingly allowed the winding-up petition.

The Respondent sought a stay of the winding-up proceedings pending the disposal of Suit 20, pursuant to the Court's inherent jurisdiction under Order 92 rule 4 of the Rules of Court 2012.

The grant of a stay is a matter of discretion. The applicant must demonstrate the existence of “special circumstances”. The Federal Court in Kosma Palm Oil Mill Sdn Bhd & Ors v Koperasi Serbausaha Makmur Bhd [2003] 4 CLJ 1 held that special circumstances must be exceptional in character, something that exceeds or excels beyond what is usual or common. The bar is high.

The key considerations for a stay are: (i) the presence of exceptional and compelling special circumstances, such that it would be unjust or inequitable for the proceedings to continue;

(ii) the balance of justice between the parties; and (iii) whether the application is genuine or merely a tactic to delay proceedings (see: Kosma Palm Oil Mill Sdn Bhd & Ors v Koperasi Serbausaha Makmur Bhd (supra); Jagdis Singh Banta Singh v Outlet Rank (M) Sdn Bhd [2013] 3 MLRA 104; Public Bank Berhad v Umapagan K Ampikaipakan & Ors [2025] CLJU 510).

The Respondent's sole ground for the stay was that, once Suit 20 was resolved and the strata title rectified, XZSB would be able to sell the Parcels to an interested purchaser and apply the proceeds towards the Judgment Sum. I find that this does not constitute special circumstances for the following reasons.

First, the alleged interested purchaser was not identified. No Letter of Intent, no binding commitment, and no documentary evidence of the purchaser's identity, financial capacity, or transaction timeline was provided. The assertion was bare and entirely unverifiable.

Second, the prospect of payment is wholly contingent and speculative. It depends on: (i) a favourable outcome in Suit 20, in which the Petitioner is not a party; (ii) the completion of the intended sale; and (iii) the application of the sale proceeds to the judgment debt. Each step is uncertain and outside the Petitioner's control.

Third, the relevant question is whether the Respondent can pay now, not whether it might be able to pay at some uncertain future point, contingent on a series of conditions. The High Court in MBSB Bank Bhd v Erakemas Sdn Bhd [2024] 9 CLJ 245 confronted a near-identical situation and held: [19] First - the asserted promise-to-pay from MOE was made in August 2023. At the hearing of R's stay application (on 31 May 2024), nine months had lapsed. No payment was made. R has not produced any evidence that MOE has paid R or paid money into the revenue collection account. This unsubstantiated and unrealised ground can hardly be considered an appropriate reason to stay this winding up petition. Nor can it be considered a special circumstance that warrants a stay. [20] Second - when R failed to satisfy P's s. statutory demand within the prescribed time, R was deemed to be unable to pay its debt to P. The question that I must consider is whether R could have paid the judgment debt to P, and not whether R will receive, or will likely receive, payments from the MOE so that its judgment debt could later be paid. [21] I am therefore compelled to find that there is no special circumstance that justifies a stay of this winding up petition. I see no reason to adjourn the hearing of this petition, conditionally or unconditionally. I also see no fit reason to make an interim or final order to stay this petition.” [emphasis added]

The parallels with the present case are clear. The Respondent asks this Court to stay winding-up proceedings on the basis of what might happen if Suit 20 were to succeed. That is precisely the kind of speculative and contingent hope that the court in MBSB Bank Bhd v Erakemas Sdn Bhd (supra) firmly rejected.

The balance of justice firmly favours refusing the stay. The Petitioner is a judgment creditor holding a valid, unappealed judgment in excess of RM15.9 million. Not a single cent has been received since the judgment was entered in January 2024. Granting a stay would deprive the Petitioner of its statutory rights for an indefinite and uncertain period, contingent on the outcome of litigation in which it is not even a party.

As observed in Public Bank Berhad v Umapagan K Ampikaipakan & Ors (supra), the mere possibility that a pending sale might eventually yield sufficient proceeds to repay the debt cannot, without more, justify staying proceedings against a judgment debtor. The Petitioner is entitled to proceed without further delay. The Court observed that: “[54] Accordingly, in our case, just because the Bank has commenced Foreclosure Proceedings and the same is soon to be heard by the High Court, cannot without more be a justification to stay the proceedings in this action against D3. This is quite apart from the fact that the proceeds of the Court sanctioned sale may be likely to be sufficient to repay the outstanding debt under the Loan, a fact which incidentally the Bank is disputing.” [emphasis added]

Therefore, this Court finds that the Respondent has not demonstrated any special circumstances warranting a stay of the winding-up proceedings. Its sole ground was a contingent and speculative future sale dependent on the resolution of third-party litigation, which falls far short of the legal threshold. I therefore dismissed Enclosure 25.

For the reasons set out above, I allowed the winding-up petition in Enclosure 2, with costs of RM15,000.00, and ordered that Casa Andaman Sdn Bhd be wound up pursuant to the Companies Act 2016. Further, I dismissed the Respondent’s stay application in Enclosure 25, with costs of RM5,000.00. Dated 25 MAY 2026 -sgd-JAMHIRAH ALI JUDGE HIGH COURT OF MALAYA KUALA LUMPUR To the parties’ solicitors: For the Petitioner : Karen Tan Wee Sean (Messrs Skrine) For the Respondent : Wong Kar Chun with Wong Yi Ying (Messrs Shu Yin, Teh & Taing)